10-Q 1 box-20211031.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36805

 

Box, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-2714444

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

900 Jefferson Ave.

Redwood City, California 94063

(Address of principal executive offices and Zip Code)

(877) 729-4269

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value 
per share

 

BOX

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Small reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of November 30, 2021, the number of shares of the registrant’s Class A common stock outstanding was 148,299,517.

 

 

 


 

TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION

 

Page

Item 1.

 

Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets as of October 31, 2021 and January 31, 2021

 

5

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2021 and 2020

 

6

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31, 2021 and 2020

 

7

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' (Deficit) Equity for the Three and Nine Months Ended October 31, 2021 and 2020

 

8

 

 

Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended October 31, 2021 and 2020

 

10

 

 

Notes to Condensed Consolidated Financial Statements

 

11

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

39

Item 4.

 

Controls and Procedures

 

40

 

 

PART II – OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

41

Item 1A.

 

Risk Factors

 

41

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

63

Item 6.

 

Exhibits

 

63

 

 

Signatures

 

65

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

our future financial and operating results; including expectations regarding revenues, deferred revenue, billings, remaining performance obligations, gross margins, operating income, and net retention rate;
our ability to maintain an adequate rate of revenue and billings growth and our expectations regarding such growth;
our market opportunity, business plan and ability to effectively manage our growth;
our ability to achieve profitability and expand or maintain positive cash flow;
our ability to achieve our long-term margin objectives;
our ability to grow our remaining performance obligations;
our expectations regarding our revenue mix;
our ability to maintain, protect and enhance our brand and intellectual property;
costs associated with defending intellectual property infringement and other claims and the frequency of such claims;
our ability to attract and retain end-customers;
our ability to further penetrate our existing customer base;
our ability to displace existing products in established markets;
our ability to expand our leadership position as a cloud content management platform;
our ability to timely and effectively scale and adapt our existing technology;
our ability to innovate new products and features and bring them to market in a timely manner and the expected benefits to customers and potential customers of our products;
our investment strategy, including our plans to further invest in our business, including investment in research and development, sales and marketing, our data center infrastructure and our professional services organization, and our ability to effectively manage such investments;
our ability to expand internationally;
expectations about competition and its effect in our market and our ability to compete;
the effects of seasonal trends on our operating results;
use of non-GAAP financial measures;
our belief regarding the sufficiency of our cash, cash equivalents and credit facilities to meet our working capital and capital expenditure needs for at least the next 12 months;
our expectations concerning relationships with third parties;
our ability to attract and retain qualified employees and key personnel;
our ability to realize the anticipated benefits of our partnerships with third parties;
the effects of new laws, policies, taxes and regulations on our business;
management’s plans, beliefs and objectives, including the importance of our brand and culture on our business;

3


 

acquisitions of or investments in complementary companies, products, services or technologies and our ability to successfully integrate such companies or assets, including the development of Box Sign;
the KKR-led investment in Box and achievement of its potential benefits;
any potential repurchase of our Class A common stock;
the potential impact of shareholder activism on Box’s business and operations; and
the impact of public health epidemics or pandemics, such as the COVID-19 pandemic, and governmental responses thereto.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

4


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BOX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

October 31,

 

 

January 31,

 

 

 

2021

 

 

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

568,265

 

 

$

595,082

 

Short-term investments

 

 

140,000

 

 

 

 

Accounts receivable, net

 

 

154,624

 

 

 

228,309

 

Prepaid expenses and other current assets

 

 

64,730

 

 

 

55,895

 

Total current assets

 

 

927,619

 

 

 

879,286

 

Property and equipment, net

 

 

117,397

 

 

 

160,148

 

Operating lease right-of-use assets, net

 

 

168,840

 

 

 

194,253

 

Goodwill

 

 

75,860

 

 

 

18,740

 

Other long-term assets

 

 

115,361

 

 

 

99,255

 

Total assets

 

$

1,405,077

 

 

$

1,351,682

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

54,608

 

 

$

32,128

 

Accrued compensation and benefits

 

 

33,606

 

 

 

39,123

 

Finance lease liabilities

 

 

43,794

 

 

 

49,888

 

Operating lease liabilities

 

 

42,269

 

 

 

47,771

 

Deferred revenue

 

 

413,511

 

 

 

443,929

 

Total current liabilities

 

 

587,788

 

 

 

612,839

 

Debt, net, non-current

 

 

366,993

 

 

 

297,614

 

Finance lease liabilities, non-current

 

 

29,420

 

 

 

60,351

 

Operating lease liabilities, non-current

 

 

168,242

 

 

 

192,531

 

Deferred revenue, non-current

 

 

16,153

 

 

 

21,684

 

Other long-term liabilities

 

 

16,465

 

 

 

15,598

 

Total liabilities

 

 

1,185,061

 

 

 

1,200,617

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Series A convertible preferred stock, par value of $0.0001 per share; 500 shares (unaudited) authorized, issued and outstanding as of October 31, 2021

 

 

493,166

 

 

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 149,010 shares (unaudited) and 159,851 shares issued and outstanding as of October 31 and January 31, 2021, respectively

 

 

15

 

 

 

16

 

Additional paid-in capital

 

 

1,089,180

 

 

 

1,474,843

 

Treasury stock

 

 

(1,177

)

 

 

(1,177

)

Accumulated other comprehensive loss

 

 

(2,914

)

 

 

(938

)

Accumulated deficit

 

 

(1,358,254

)

 

 

(1,321,679

)

Total stockholders’ (deficit) equity

 

 

(273,150

)

 

 

151,065

 

Total liabilities, convertible preferred stock and stockholders’ (deficit) equity

 

$

1,405,077

 

 

$

1,351,682

 

 

See notes to condensed consolidated financial statements.

5


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

224,044

 

 

$

196,003

 

 

$

640,971

 

 

$

571,857

 

Cost of revenue

 

 

63,069

 

 

 

56,812

 

 

 

184,804

 

 

 

166,141

 

Gross profit

 

 

160,975

 

 

 

139,191

 

 

 

456,167

 

 

 

405,716

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

55,837

 

 

 

49,454

 

 

 

159,418

 

 

 

152,683

 

Sales and marketing

 

 

76,368

 

 

 

67,112

 

 

 

218,967

 

 

 

207,619

 

General and administrative

 

 

39,857

 

 

 

25,239

 

 

 

105,242

 

 

 

79,778

 

Total operating expenses

 

 

172,062

 

 

 

141,805

 

 

 

483,627

 

 

 

440,080

 

Loss from operations

 

 

(11,087

)

 

 

(2,614

)

 

 

(27,460

)

 

 

(34,364

)

Interest and other expense, net

 

 

(2,336

)

 

 

(2,319

)

 

 

(8,275

)

 

 

(3,235

)

Loss before provision for income taxes

 

 

(13,423

)

 

 

(4,933

)

 

 

(35,735

)

 

 

(37,599

)

Provision for income taxes

 

 

438

 

 

 

351

 

 

 

1,399

 

 

 

891

 

Net loss

 

 

(13,861

)

 

 

(5,284

)

 

 

(37,134

)

 

 

(38,490

)

Dividend on series A convertible preferred stock

 

 

(3,775

)

 

 

 

 

 

(7,104

)

 

 

 

Accretion of series A convertible preferred stock

 

 

(526

)

 

 

 

 

 

(982

)

 

 

 

Net loss attributable to common stockholders

 

$

(18,162

)

 

$

(5,284

)

 

$

(45,220

)

 

$

(38,490

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.12

)

 

$

(0.03

)

 

$

(0.29

)

 

$

(0.25

)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

 

 

151,426

 

 

 

157,465

 

 

 

158,068

 

 

 

154,734

 

 

 

See notes to condensed consolidated financial statements.

6


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(13,861

)

 

$

(5,284

)

 

$

(37,134

)

 

$

(38,490

)

Other comprehensive (loss) income*:

 

 

 

 

 

 

 

 

 

 

 

 

Changes in foreign currency translation adjustment

 

 

(1,754

)

 

 

(37

)

 

 

(2,730

)

 

 

135

 

Changes in unrealized loss on cash flow hedge

 

 

452

 

 

 

115

 

 

 

754

 

 

 

(1,125

)

Other comprehensive (loss) income

 

 

(1,302

)

 

 

78

 

 

 

(1,976

)

 

 

(990

)

Comprehensive loss

 

$

(15,163

)

 

$

(5,206

)

 

$

(39,110

)

 

$

(39,480

)

 

* Tax effect was not material

See notes to condensed consolidated financial statements.

7


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)

 

 

 

Three Months Ended October 31, 2021

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Treasury

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Loss

 

 

Deficit

 

 

(Deficit)

 

Balance as of July 31, 2021

 

 

500

 

 

$

488,894

 

 

 

 

152,660

 

 

$

15

 

 

$

1,194,180

 

 

$

(1,177

)

 

$

(1,612

)

 

$

(1,344,393

)

 

$

(152,987

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

2,057

 

 

 

1

 

 

 

(3,148

)

 

 

 

 

 

 

 

 

 

 

 

(3,147

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,827

 

 

 

 

 

 

 

 

 

 

 

 

40,827

 

Series A convertible preferred stock, net of issuance costs

 

 

 

 

 

(29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend on series A convertible preferred stock

 

 

 

 

 

3,775

 

 

 

 

 

 

 

 

 

 

(3,775

)

 

 

 

 

 

 

 

 

 

 

 

(3,775

)

Accretion of series A convertible preferred stock

 

 

 

 

 

526

 

 

 

 

 

 

 

 

 

 

(526

)

 

 

 

 

 

 

 

 

 

 

 

(526

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(5,707

)

 

 

(1

)

 

 

(138,378

)

 

 

 

 

 

 

 

 

 

 

 

(138,379

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,302

)

 

 

 

 

 

(1,302

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,861

)

 

 

(13,861

)

Balance as of October 31, 2021

 

 

500

 

 

$

493,166

 

 

 

 

149,010

 

 

$

15

 

 

$

1,089,180

 

 

$

(1,177

)

 

$

(2,914

)

 

$

(1,358,254

)

 

$

(273,150

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended October 31, 2020

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Treasury

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of July 31, 2020

 

 

 

 

$

 

 

 

 

156,399

 

 

$

16

 

 

$

1,373,580

 

 

$

(1,177

)

 

$

(1,375

)

 

$

(1,311,452

)

 

$

59,592

 

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

2,244

 

 

 

 

 

 

(2,726

)

 

 

 

 

 

 

 

 

 

 

 

(2,726

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,902

 

 

 

 

 

 

 

 

 

 

 

 

35,902

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

78

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,284

)

 

 

(5,284

)

Balance as of October 31, 2020

 

 

 

 

$

 

 

 

 

158,643

 

 

$

16

 

 

$

1,406,756

 

 

$

(1,177

)

 

$

(1,297

)

 

$

(1,316,736

)

 

$

87,562

 

 

 

See notes to condensed consolidated financial statements.

8


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended October 31, 2021

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Treasury

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders' Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Loss

 

 

Deficit

 

 

(Deficit)

 

Balance as of January 31, 2021

 

 

 

 

$

 

 

 

 

159,851

 

 

$

16

 

 

$

1,474,843

 

 

$

(1,177

)

 

$

(938

)

 

$

(1,321,679

)

 

$

151,065

 

Cumulative adjustment due to adoption of ASU 2020-06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(68,576

)

 

 

 

 

 

 

 

 

559

 

 

 

(68,017

)

Stock consideration in connection with fiscal 2022 acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

6,246

 

 

 

1

 

 

 

(19,937

)

 

 

 

 

 

 

 

 

 

 

 

(19,936

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129,316